"Consumer Protection? Who Needs It?" - The House Appropriations Committee

If you're like most humans, when you see “Appropriations Committee Releases Fiscal Year 2012 Financial Services Appropriations Bill” your eyes probably wander to see if there's any grass growing or paint drying nearby. And if you're under 25 you probably didn't even read the whole thing, did you? Well you should've, because as Shelly M. from Rock Springs, Wyoming pointed out to me, the financial services bill contains several provisions that could impact your life in a big way. So close out of Reddit, leave StumbleUpon alone, and forget about your email and newsfeed for a bit. Take a few minutes to read about how we — "the little guys" — might be getting a raw deal.

On June 15, the House Appropriations Committee passed its financial services bill. (Read this earlier post for a run down on how the whole appropriations process works...c'mon, all your friends are doing it.) This bill directs how much money gets spent on things like the IRS, office supplies for the White House, and most importantly for this discussion: the Consumer Financial Protection Bureau.

The Consumer Financial Protection Bureau (CFPB) was created in the wake of the economic collapse of 2008 (all those financial institutions on Wall Street shoveling toxic assets back and forth) with the passage of the Dodd-Frank Act. The Dodd-Frank Act, aside from introducing fail safes to prevent another economic meltdown, also called for the creation of an agency whose prime directive is to protect consumers in the financial market by giving us the information we need to make good decisions.

RoboCop: Newest Addition to the CFPB Staff

You see, prior to the Dodd-Frank Act, the responsibility for making sure people like you and me were getting a fair shake on things like credit cards, mortgages, or student loans was splintered across several different agencies. None of those agencies had the singular mission of watching out for us consumers. This resulted in what I like to call the “Who's Gonna Stop Us?” conundrum. Without a clear consensus on who was responsible for consumer protection, banks and financial institutions were able to get away with things like raise your credit card rates without warning, or provide loans so riddled with fine print you might not have known your interest rates would skyrocket to unaffordable levels.

To save on paper, my bank started mailing me disclosure forms on rice.

So what the CFPB does is make sure that financial products like loans or credit cards are explained simply and clearly, with all the important information you need up front. Hidden costs will be revealed, and prices and risks will be made clear. By reducing fine print and having important information front-and-center, consumers (that's you and me) can easily compare financial products and choose the one that's best for us.

Sounds like a good idea, right? Consolidate consumer protection under one agency instead of having it ineffectively scattered across several others? Not so much for some members of Congress.

Under the Dodd-Frank Act, the CFPB is to be funded by the Federal Reserve System. The Fed is semi-private government agency that helps to manage our economy and financial markets. This means that the CFPB would not be subject to the yearly appropriations process like most other government agencies — making it politically insulated from things like, oh I don't know, Wall Street lobbyists let's say. But under the financial services bill passed by the House Appropriations Committee, the CFPB will be subject to the Congressional appropriations process and all the political horse-trading that comes with it. The bill would also cut funding for the CFPB down to $200 million — far below the $498 million provided for it in the Dodd-Frank Act, and still well below the $329 million the agency says it needs to operate through Fiscal Year 2012. Essentially, the CFPB would be rendered incapable of effectively carrying out its mission of making sure you and I getting a fair deal in the financial market.

Of course, this is just what the House Appropriations Committee has put out. The bill still has to be voted upon by the full House of Representatives. This seems to be a sure thing, and could happen by mid-July. The Senate also has to pass its own version of the bill. The two versions have to be reconciled, then signed by the President to become law.

But the message here is clear: consumer protection is not a priority for many in Congress. Rep. Hal Rogers (R-KY), Chair of the House Appropriations Committee, said in reference to the CFPB that “many questions remain as to its authority and mission.” Furthermore, the bill requires reporting of the “costs and regulatory burdens caused by the flawed Dodd-Frank financial legislation.” Congressional resistance to the CFPB is further evident in the blockage of Dr. Elizabeth Warren's appointment to head the new agency.

$22.5 million cut from education and school improvement in the District of Columbia

$640 million for the Executive Office of the President – with a prohibition against the funds being used to prepare “signing statements” for the President. Signing statements have been used by many Presidents to weaken or sidestep laws passed by Congress. This provision is a clear assertion of Congressional authority.

No funding increase for the Securities & Exchange Commission (the people who were supposed to be watching over the firms that caused the 2008 recession)